Borrower profile: RREAF eyes emerging RV park market 

Dallas-based manager RREAF Holdings is going deep into what it believes will be a growing commercial real estate niche: recreational vehicle parks. 

The firm earlier this month acquired five RV parks across Alabama, Florida and Texas in a deal with a total capitalization of $157 million, and is working on a second acquisition of $550 million that it hopes to close before year-end, says Graham Sowden, chief investment officer.  

“I expect us to close on a similar-sized portfolio two or three times per year as we grow our portfolio,” Sowden says.  

The firm, with about $5 billion in assets under management, invests across asset classes that include workforce housing and beachfront hospitality. RREAF owns more than 17,000 workforce housing units across the Southeastern US. 

The heavily fragmented RV sector complements the firm’s existing areas of investment but also is tapping into some of the trends which have emerged since the start of the covid-19 pandemic.  

According to data from the Recreational Vehicle Industry Association, ownership of RVs has risen by more than 62 percent over the past 20 years. The Washington, DC-based industry group also found that 31 percent of the participants in the survey were first-time owners and, within that, 84 percent of the 18- to 34-year-old cohort anticipates buying another an RV. All-in-all there are about 11 million RV owners across the US. 

“More often, we started to see families ditching their homes or traditional vacation patterns in favor of RV living or more nomadic lifestyles,” Sowden says. “We started seeing trends where more Gen X and Millennials were buying RVs, which led to a staggering increase in RV sales.” 

Horizontal hotels 

As RREAF sought to build out its portfolio, Sowden and his partners traveled to RV parks throughout the US to get a better handle on the opportunity and its drivers. 

“We were trying to figure out what was driving the new American Dream. The old American Dream was a nuclear family with a white picket fence but now it seems like people want to move around and have more flexibility. And for their kids, there is a sense that parents want their kids to be able to travel,” Sowden says.  

RREAF sees a niche in being able to renovate and relaunch RV parks throughout the US, with Sowden noting what the firm believes is an ample consolidation opportunity in a fragmented industry. There are about 15,000 RV parks in the US, of which only 700 are franchised or branded, according to research from RREAF.  

“What we saw was the fragmentation in the market as a whole and the need to add amenities to these properties,” he says. “There has not been a tremendous amount of institutional involvement in the space as a whole.” 

The New American Dream 

As it builds out its portfolio, RREAF has plans to provide a heavily amenitized, resort-style experience for its users. Many of the owners were mom-and-pop investors who have not been able to complete upgrades in many years, which means an immediate increase in nightly rates once these properties come online. 

“Our vision is to launch our own brand and have branded RV resorts across the county,” says Sowden.  

The firm’s recent acquisitions were sourced off-market from different sellers. “We met with different brokers and owners in our target markets and put together a big pipeline,” Sowden says. 

Financing its projects has, in some ways, been more difficult than sourcing acquisitions.  

“Financing these deals has been an educational process for sure. Most lenders and equity groups have not heard of the RV park as an institutional real estate investment or know that we think it is a viable asset class,” Sowden says.

“When we met with the biggest institutional groups on the first portfolio, everyone got really excited when we started talking about the numbers and the potential upside. But we ended up partnering with a group that we have done billions of dollars of business with in the past because we felt we needed to be really confident in the execution.” 

Because of the amount of redevelopment that will be necessary, the firm does not expect to be able to unveil its first newly converted outdoor living park for another year.

But over the long run, RREAF has a vision: “We’d like someone to be able to drive from Washington State all the way to Key West and stop at one of our parks,” Sowden says.